“I can’t buy a home, because I can’t afford the down payment”
Traditionally, to get into a mortgage, a buyer would need to put down 20% of the purchase price at the time of closing. This can be quite daunting (the down payment for $200,000 home would be $40,000) and for most, just isn’t a possibility. In fact, 20% down payments are now an exception as opposed to the norm, especially for first-time homebuyers.
Here are several low-down payment options:
· FHA loans – FHA loans only require 3.5% as a down payment. Their rates are also lower than conventional mortgages and allow for less income/lower credit scores. Most first-time homebuyers buy homes with FHA loans.
· Conventional loans – You can still get a conventional loan without 20% down. In fact, you can now get a conventional loan for as little as 3% down.
In addition, there are several no-down payment options:
· VA loans – For those who are serving or have served in the military (not just veterans), VA loans are available and don’t require any down payment. They also offer lower rates, no mortgage insurance, etc.
· USDA loans – For borrowers willing to live in “rural” areas (in Utah, that’s north of Ogden and south of Spanish Fork), USDA also offers loans which don’t require any down payment.
· Grants, Gifts, and Seconds – Most loan types allow for down payments to be gifted from family, friends, and even employers. There are also programs that allow borrowers to get grants for the down payment or borrow 3.5% as a low interest 2nd mortgage.
At Evergreen, we have significant experience helping clients without access to large down payments. While owning a home takes budgeting and planning, don’t let the immediate absence of a down-payment deter you.
